Investing in DSE or CSE

Whenever anyone asks me, “I’ve a little savings, how to make it grow?" Without any hesitation I straight forward suggest them to put it in the stock market.

Why?

Because I think for little amount of savers it is the best option to multiply their money. Now let us see why it is the best option among some alternatives.

1. They can not start a business of their own because they have too little savings to start with or they don't have enough time for it.

2. They can put their money in government issued savings certificate which eventually provide 8%-12% interest. Now if someone have a savings of Tk. 100,000/= at 12% interest his return will be only Tk. 12000/= a year- assuming no taxes on this return. But having a 10% tax this return is only Tk. 10800/= only.

3. In case of putting the money in the bank, it provides 10%-13% return on fixed deposits and even lower in savings account and pension schemes. Here too the return is at best 13000/=. If we deduct 10% govt tax, it will be only 11700/=

4. Now focus on stock market. Usually what do small investors do? At the starting level they usually rush to catch the IPOs. Most of the IPOs come with 5000/= market lot. It means someone can invest his money even if his savings is as small as Tk. 5000/=. Now what is the earnings possibility? Assume Tk. 100,000/= as investment capability as before. Now he can apply for 20 lots of shares Tk.5000/= each. What is the possibility to get at least one lot of share. This possibility varies depending on the size of the IPO. Historical evidence shows that for a renowned company number of applications is much higher than others. Considering that issuing firm is a renowned one, applications are 5-7 times it the size of the issue is more than Tk. 500million. For an issue size of less than Tk. 100million number of application is 30-40 times the size of the issue. Assuming the size is in between Tk. 300-700 million we can expect applications not more than 10 multiple of the issue size. In this case at least two lots out of twenty has a very much possibility to click. Now here comes the final question of return. On an average returns from IPOs are not less than 100%. So, the return will be at least Tk. 10000/= from two lots of stock. Usually it takes approximately three months to start trading of a new issue (time considered from the time of subscription to trading).The return stands for 10% on the whole investment in three months and annualized return of 46.41%!

There is another dimension of stock market- secondary trading. From BD perspective still it is very much risky for new comer. But people who have the least technical analytical ability of stock market- can get a super profit.

From above discussion you already decided to plunge into stock market.

But HOW?

Here comes the reply.

Step-1)

To invest in stock market you must have a Beneficiary Owner (BO) account with a Depository Participant (DP). Just go to a DP, collect the BO a/c opening form, fill it up properly and submit. It doesn't take more than a week process the BO a/c. Generally it takes only 2-3 days(BO account opening form is given after this topic).

Step-2)

As soon as you have a BO a/c, you are registered to invest in stock market. Your BO are accompanied with a 16digit BO ID and client code given by your broker.

Now you can invest in IPO and secondary market. Foloowing documents are required to open an account in Marchent Bank divission(MBD) of any broker house or bank:

1. 02. copy Passport size photo of you.

2. 01 copy Passport size photo of nominee.

3. Photocopy of Passport /ID Card/Nationality certificate.

4. 01 copy of Bank statement.

5. Check or cash for depositing money for your account.

After all these,for secondary trade just go to your broker place your order for stock purchase and pay for it. That's all, easy and simple. Even if you request you can even trade over phone,that’s all about it.You've invested in stock market!

If you want to subscribe for primary share commonly referred as IPO you just have to collect the subscription form fill it up and submit to the bankers to the issue (names of the bankers to the issue are generally printed at the back of the form) with the amount of money required. And you did it all!